The first point is that the firm does not think that managing to an arbitrary target like the “25/25 Plan” makes sense. In this manner it noted, “We would also urge the company to accelerate monetizing any assets that are not core to the E&P business (such as midstream & oil services assets) and/or any more E&P assets which are not overly reliant on depressed spot natural gas prices and where the company does not have a leading position.”
Another point is to end the unproductive communication that the company is conducting. Here it urges management to put their heads down and get the items in #1 done. The point is simple in that Chesapeake’s sell-side conferences, media interviews with no hope of a fair hearing, and meetings all over the U.S. with groups who may have only a casual interest but don’t mind hearing the “story” use valuable amounts of top management’s time with no apparent benefit and plenty of misinterpretation detriment. Here it even said “CHK stock has far too many renters and not enough owners, so we would suggest the current system of shareholder communications is not working.”
The largest point to note was one out of context, but it notes, “we urge the board to be open to any offers to acquire the whole company” even though it also noted that it would not encourage any action that would generate a lowball bid versus the net asset value of the company.
Southeastern’s letter was signed by Mason Hawkins (Chairman & CEO), Staley Cates (President & Chief Investment Officer), and Ross Glotzbach (Senior Analyst & Principal).
Chesapeake shares did try to initially rally but this is still down 0.5% at $17.31 against a 52-week trading range of $16.70 to $35.75.
JON C. OGG
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